Unemployment at its highest in over a decade

STUFF.CO.NZ AND BUSINESSWIRE

The Prime Minister is warning people not to panic after new figures out today showed unemployment has jumped to 7.3 percent, taking the number of jobless people to its highest level since 1999.

Unemployment rose to 7.3 percent in the December quarter from 6.5 percent the previous quarter, according to the Household Labour Force Survey released today.

The number of unemployed people rose by 18,000 to 168,000 during the quarter, taking the unemployment rate to its highest level since the June 1999 quarter.

The jump in the unemployment rate was largely due to an increase in the number of people entering the labour force but who were unable to find work.

Prime Minister John Key said be believed the unemployment numbers were peaking, saying that the data was a look back in time when they knew looking forward that people were going off the unemployment benefit.

"It is my expectation that unemployment will peak some time this year, hopefully in the first quarter, but the latest by the second quarter.

"The signs we have seen from the economy are actually encouraging and it is very important people don't panic because they see an unemployment number rising, because it is a rearward looking figure. It always lags what is happening in the real economy.

He told reporters it was important to note the economy was not losing jobs, it was a case of not creating new ones fast enough.

"We want to see the number come down."

The economy was lifting off again.

"We have a very efficient economy and as confidence is restored internationally you will see this rate fall."

New Zealand was part of the worst global recession since the 1930s but he would next week announce details of the economic programme that will see a much brighter picture by the end of the year.

"An economy is like a super tanker it takes a long time to turn around and we had nine years of poor economy policy that put us in the wrong place," Mr Key said.

The survey found that young people had the hardest time finding work, with a marked increase in the number of unemployed 15 to 24-year-olds. The rate for this age group rose by 6.4 percentage points to 18.4 percent.

The unemployment rate for Maori reached 15.4 percent during the quarter compared with 4.6 percent for the European ethnic grouping.

The rise in unemployment was more than expected and has stoked speculation the central bank won't rush to raise interest rates. The kiwi dollar tumbled and the two-year swap rate dropped.

Economists had expected a rate of 6.8%, according to a Reuters survey. The participation rate edged up to 68.1% from 68%.

Unemployment topped the central bank's estimate of 6.6%, giving investors cause to think Governor Alan Bollard is more likely to wait until June to raise the official cash rate from a record low 2.5%. The New Zealand dollar sank to 70.17 U.S. cents from 70.71 cents immediately before the figures were released.

"The middle of the year could now be more like June than April," said Keith Poore, who oversees $4 billion as head of investment strategy at AXA Global Investors in Wellington. "The plan is still to raise interest rates but maybe not in such big, meaty chunks."

In annual terms, employment fell in manufacturing, retailing, accommodation, the arts, recreation and other services industries. Employment in health acre and social assistance rose.

Mike Jones, market strategist at Bank of New Zealand, said there is the possibility of a "technical bounce" in the current quarter, given measures such as the participation rate had edged higher. Still, with unemployment higher than the central bank expected, "it gives them more reason to hold off on rate rises."

Companies expecting to hire more workers in the first quarter about matched those planning to shed staff, according to a New Zealand Institute of Economic Research survey last month. 

- with NZPA

- © Fairfax NZ News